PA Online Casino and Poker – Latest News and Analysis

Pennsylvania is officiallythe fourth state in the US to legalize online poker or casino games. Gov. Tom Wolf signed a bill into law that authorizes and regulates online gambling, and a full rollout is expected sometime in 2018.

Scroll down for the latest news and analysis of the developing situation for regulated online gambling in PA. Click here for more questions and answers about the new law.

If PA joins a multistate poker agreement with NJ, Nevada and Delaware, we’re suddenly looking at a much more interesting online poker industry in the US. WSOP is now sharing player pools in NJ and Nevada.

The law was a part of negotiations over revenue to make up a shortfall in the state budget, and is expected to generate $200 to $250 million in new money for the state.

Other than iGaming, it also legalizes and/or regulates, among other things:

Online lottery

Video gaming terminals at truck stops

Satellite casinos

Daily fantasy sports

Sports betting (with a change to federal law)

Pennsylvania online poker 2018 – FAQ

How much revenue will the PA online gambling industry generate?

Under the provisions of H 271, the licensing fee to participate in online gambling would be be $10 million to provide slots, poker and table games. There will be 12 of these licenses available — one for each current casino licensee in the state.

If any of those licenses go unclaimed after an initial 90-day period, then licenses for each segment individually (slots, poker, tables) will be up for grabs at $4 million apiece.

Most of the land-based casinos in Pennsylvania are expected to participate. Only one — Sands Bethlehem — will almost certainly abstain from online gambling, although even that isn’t a given.

The rest are likely to either be enthusiastic or reluctant participants in the industry. Some have already forged online gambling partnerships.

Our white paper on the prospects for PA online gambling figures that the state will see $120 million from licensing fees.

Tax revenue

But the real question is: Once they collect fees, how much tax revenue will the industry generate on a recurring basis?

The best means of answering that question is to look at the performance of the regulated NJ online gambling market.

The aforementioned white paper estimates $154 million in year one for both poker and casino, and $275 million in year five. So what does that mean for the state?

Slot revenue is taxed at a 54-percent rate, while table games and poker are taxed at 16 percent. Our revenue forecast estimates at these rates the state will receive $400 million in taxes over five years.

Why is Pennsylvania legalizing online poker and online casino games?

Pennsylvania has a booming land-based casino economy, but rising competition from neighboring states threatens to put a dent in the industry’s margins. The state is trying to remain competitive.

Just on licensing fees alone, online gambling would fill more than a $100 million hole in the billions the state needs to come up with to plug a budget hole.

Pennsylvania residents already play at unregulated offshore sites. By legalizing online gambling, the state would safeguard its citizens while creating a sustainable source of tax revenue.

Who will operate the online casino and online poker sites?

That’s still to be determined. The land-based casinos will likely partner with current online casino and poker operators, much like we’ve seen in New Jersey.

Would Pennsylvania network with other states for online poker?

The possibility is there, as the state allows for interstate compacts for online poker. As Nevada, New Jersey and Delaware all are all part of a compact together, they would certainly welcome PA, should it want to join.

That would make a sizable market for shared liquidity, allowing for more cash-game traffic and bigger tournament guarantees.

Would I have to live in Pennsylvania to play at state sites?

You won’t have to hold residence in Pennsylvania to play at the state’s regulated sites. However you will have to be physically located within its borders.

Background on Pennsylvania online gambling

The Senate punts on regulated online casino and poker games in 2016

For a time, it looked like Pennsylvania was a slam dunk to legalize online gambling in 2016. Those hopes were dashed when the Senate failed to reach a consensus before the last scheduled session day.

After a strong but ultimately fruitless push in 2015, the latest legislative effort started off with more of a whimper than a bang. It wasn’t until late May that the wheels began turning. That’s when the House of Representatives considered two gaming reform amendments. This amendments, if passed, would become part of a separate gaming bill, HB 1925.

Amendment A7622

The first, A7622, packaged online poker/casino and other reforms alongside the inclusion of video gaming terminals (VGTs) at non-casino locations. The other, A7622, was a mirror of Rep. John Payne‘s omnibus gaming reform bill (HB 649) from the year prior, and did not include VGTs.

Confusion ruled the day, and both amendments were soundly defeated. (Although the margin of defeat for A7622 was significantly smaller.)

An amendment to allow VGTs nearly derailed the bill, failing by a vote of 118-79. But a last-minute amendment by Rep. Rosita Youngblood (the aptly titled Youngblood Amendment) calling for the exclusion of VGTs, turned the tide. The amendment ultimately passed 115-80.

House Bill 2150

In July, Governor Tom Wolf allowed a $1.3 billion revenue package that earmarked $100 million for gaming reform, to become law. All indications pointed to licensing fees from online gambling operators would be counted on to fill the gap.

The path to regulated online gambling in Pennsylvania

2013

Online gambling first appeared on the legislature’s radar in April 2013, when State Rep. Tina Davisintroduced HB 1235. The bill would permit both online poker and casino within the commonwealth. It also set operator licensing fees at $5 million, and called for a 28 percent tax rate on gross gaming revenue.

By June of this year, a general lack of interest among lawmakers resulted in the House Committee on Gaming Oversight chair Tina Pickett recommending the bill be stalled until 2015. But it wouldn’t take nearly that long for the ball to begin rolling again.

In December 2013, the Senate took a mammoth step forward when it passed SR 273. The resolution tasked Econsult Solutions with conducting a study that would measure the economic impact of online gambling.

2014

The results were published in May 2014, and were cause for optimism. Econsult estimated that online gambling would yield $68 million in first year tax revenue, and $110 million annually going forward. It also concluded that online gambling would have a complementary impact on land-based casino revenue.

Granted, the revenue estimates are always taken with a massive grain of salt, as they presumed a blended 20 percent tax rate on online poker and 60 percent on slots.

In either case, the results proved favorable enough for State Sen. Edwin Erickson to introduce a new online gambling bill (SB 1386) in June 2014. There was little action on that particular bill, but it set the stage for what would prove a very active 2015 session.

2015

Rep. John Payne introduced HB 649 in February 2015. Payne viewed online gambling as part of the solution to the state’s “projected $2 billion budget shortfall.” He backed his beliefs by championing online gambling legislation efforts for the next two years.

In the spring of 2015, two competing bills emerged in the House. One, HB 920, was from Tina Davis, a near replica of her 2013 bill. The other, Nick Miccarelli‘s HB 695, was an online poker only bill. Of the three, Payne’s became the most likely candidate for serious consideration.

Ahead of the June 30 budget deadline, there was the introduction of a fourth bill — this one from the State Sen. Kim Ward. SB 900 was significant in that it marked the Senate’s official entry into the conversation. Unfortunately, SB 900 was radically different than HB 649. It called for a 54 percent tax rate, a $10 million operator licensing fee, in-person registration, and the exclusion of Category 3 casinos.

The Senate held two hearings on online gambling in June 2015. After that little was heard on the topic until the fall. In October, Pennsylvania was still in the midst of a budget stalemate. When Gov. Tom Wolf’s tax plan saw defeat in the House, he became willing to discuss new revenue sources, online gambling among them.

So close and yet so far away…

The following month, the GO committee passed HB 649 by a margin of 18-8. This marked the first time an online gambling bill passed a vote in Pennsylvania. But by then, an omnibus package was attached to the bill. It called for slot machines at non-casino venues and airports, Category 3 casino expansion, and a report on daily fantasy sports, among other reforms.

It’s believed that the controversial elements of the bill, namely allowing video gaming terminals at non-casino locations, was one of the reasons efforts stalled in 2015.

Inside Pennsylvania’s land-based casino industry

Pennsylvania is currently home to 12 land-based casinos. Together they create the second-largest gambling economy in the United States. Hard to believe that just over a decade ago the industry was non-existent.

The ball got rolling in 2004, when lawmakers authorized 61,000 slot machines at existing horse tracks, resorts and slot parlors. Concurrently, the state set up the Pennsylvania Gaming Control Board. The Board would issue up to 14 licenses, and provide regulatory oversight for the nascent industry.

On December 20, 2006, six licenses for existing horse racing venues and five more for standalone casino were awarded. Of the 11 licensed operators, 10 opened or expanded their facilities by 2010. And by 2011, two Category 3 casinos — Valley Force Casino Resort and Lady Luck Casino Nemacolin — had also flipped over the open sign.

The industry took a monumental step forward in early 2010, with the legalization of table games — including poker — at slots casinos. By July 2010, top earners Sands Bethlehem, Parx Casino, and Harrah’s Chester (later rebranded as Harrah’s Philadelphia) had all instituted table games.

It was then that land-based casino revenue really began to take off, growing from $1.62 billion in 2008, to $2.49 billion in 2010, and $3.16 billion in 2012.